The days of Australian women paying more for cosmetics than their overseas peers may be coming to an end, according to the chairman and chief executive of the world’s largest cosmetics company,
L’Oréal
.

But in an exclusive interview with The Australian Financial Review,
Jean-Paul Agon
warned that the company, whose products include Lancôme nail polish, Kiehl’s moisturiser and Garnier shampoo, could never offer the same prices everywhere.

L’Oréal dropped the Australian price of its Lancôme and Kiehl’s products sold through Myer and David Jones, which have applied pressure to major international suppliers to reduce pricing disparities. The high Australian ­dollar has lured some consumers to foreign online sites such as strawberry.net and glossi.com.

“I think there should be some kind of [price] harmony," said Mr Agon, 57, speaking on the first visit to Australia by a L’Oréal CEO since the company was founded in Paris in 1909. “Not everything can be aligned because trade margins are not the same everywhere, retail margins are not the same and there are currency fluctuations permanently.

“So to have the same product at the same price all over the world is just not possible. But it’s true also that we have to be careful that the differences are not too high. So I think now that the Australian dollar is coming back to a reasonable level, the differences will be much lower. And we will also make sure when we launch products that we try to position them at a very reasonable level compared to other countries."

L’Oréal says local sales of its Lancôme Genifique serum rose 30 per cent in 2012 after it dropped prices by 24 per cent. Mr Agon also predicted that parallel importing would fall in volume “now that the Australian dollar is coming to a more reasonable level".

Australian salons among world’s best

He discussed both topics with
Johan Berg
, managing director at L’Oréal Australia and New Zealand, during a two week-long visit in January in which he challenged Mr Berg to double the size of the business here. It grew 10 per cent to $477 million in 2013.

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“I want us to be ambitious and spend more, to invest more, in order to grow faster," said Mr Agon. “It’s up to us now to invest and launch new products and new initiatives with money and advertising in order to accelerate."

The cosmetics industry’s most powerful executive, Mr Agon is notorious in the industry for paying secret – as well as official – visits to stores to see how they present L’Oréal’s brands. He visited Sydney department stores, as well as L’Oréal’s other retailers including Woolworths, Coles and Priceline in Melbourne, and concluded that local retail is “pretty advanced". He also said the Australian hair salons he visited, which distribute L’Oréal’s professional brands, were among “the most creative, modern and stylish in the world".

The marketing push by L’Oréal, which is the third-largest advertiser in the world, will use different media for different brands.

“Digital is opening up new avenues of communication that are extremely beneficial," said Mr Agon.

“With the mass market, we could only do television commercials for 30 seconds, or use magazines. But there is a redistribution, a redefinition of the media landscape, which is really good . . . thanks to that, the price of TV [commercials] have generally gone down. Now we are choosing media depending on the target and the product. For some make-up products, digital will be the right thing; for haircare and shampoo, TV would be better; for skincare, magazines will still be very instrumental."

Global market could double by 2025

The suave Parisian has worked for L’Oréal since graduating from the HEC Paris international business school in 1978. He ran various international ­divisions including the United States and Asia, which he set up, before becoming CEO in 2006.

The group, which reported record operating profits of €2.04 billion ($3.2 billion) at the half-year, is listed in Paris. It is 30.5 per cent owned by France’s Bettencourt family and 29 per cent by Nestlé. It is rumoured Mr Agon will use L’Oreal’s cash pile to buy out the Swiss chocolate company’s holding when part of a shareholder agreement expires in April. He admitted it would be tempting and “a great accretion for loyal shareholders", but added “it is Nestlé’s" decision.

Mr Agon, who set up the company’s Chinese operations in 1997, says China’s $US25.9 billion ($29.8 billion) cosmetics market is the third-largest in the world, and will soon become the biggest for L’Oreal’s signature mass-market brand, L’Oréal Paris.

He remained “very confident" about China despite signs of slowing growth, saying the “Chinese consumer revolution is a long-term movement".

“It started 20 years ago and its going to last many more . . . Maybe for some categories the rhythm won’t be as fantastic for several years. But there will still be a high level of growth for many years to come."

L’Oréal predicts that the global cosmetics market will almost double from €180 billion to €350 billion as early as 2025 due to demand from the emerging middle classes in China, India, Brazil, Indonesia, Mexico, Turkey and Russia. The company estimates it reaches 1 billion cosmetics consumers and aims to double that figure in the next 10 to 15 years. Mr Agon has expanded L’Oréal aggressively through acquisitions.

He has not seen any Australian brands to buy, but said: “If there is a brand that would seem right then it could become a candidate."

He added that he tests lots of L’Oréal skincare products on himself depending on what new ones are out, but declared good-humouredly that he has “not yet" flirted with make-up.